CO-OP to Launch Groundbreaking New Machine Learning Risk Management Tool This Year

CO-OP to Launch Groundbreaking New Machine Learning Risk Management Tool This Year

CO-OP to Launch Groundbreaking New Machine Learning Risk Management Tool This Year

According to Mercator Advisory Group, “In most situations where human beings determine risk today, a machine learning algorithm will be able to outperform those humans.” As reported in The Financial Brand, “Ray Kurzweil from Google estimates that AI will surpass human intelligence by 2019.”

By all accounts, machine learning promises to revolutionize the payments industry – if not the world – by bringing us even more automation, efficiency, security and productivity than ever before.

So what exactly is machine learning, and how can it help your credit union better detect fraud?

Machine learning is a form of AI (artificial intelligence) in which computers can learn and adapt without being explicitly programmed.

While the concept seems simple, its applications are anything but. Where deployed for risk management, machine learning is proving to be so successful at discovering complex fraud schemes amidst vast amounts of data, it will soon become an indispensable part of every financial institution’s fraud detection strategy.

CO-OP’s 2017 Machine Learning Initiative

This year, CO-OP is working in partnership with San Mateo, Calif.-based Feedzai, Inc. to implement artificial intelligence technology on behalf of client credit unions, with a groundbreaking machine learning-based risk management tool set to debut in 2017.

Developed exclusively for credit unions, the new solution is designed to achieve the following:

  • address fraud at any transaction volume
  • incorporate advanced analytics
  • take in data from multiple sources to define transaction risk scoring
  • work in real-time, declining suspect transactions on the spot
  • provide alert and case management capabilities for fraud and risk services

According to Todd Clark, CO-OP president and CEO, “A key pain point for credit unions in 2017 is that fraud mitigation tools have not kept pace with the relentless advance of fraud. CO-OP Financial Services has an equally relentless commitment to credit union and cardholder security.”

In fact, CO-OP is investing $20 million this year to ensure credit unions have access to the very best technology in the payments industry, including machine learning risk management capabilities.

The new machine learning solution will augment CO-OP’s existing neural network-based Falcon Fraud Manager system, widely recognized as the industry standard for fraud detection and prevention today.

By integrating both historical and current data into the new machine learning platform, CO-OP’s transaction scoring model will be strengthened significantly, for faster, more precise debit and credit card fraud detection. Machine learning will also be deployed as the primary fraud management tool for CO-OP Shared Branching.

CO-OP’s AI Strategy Going Forward

While this year’s initiative will bring unprecedented benefits to CO-OP client credit unions and their members, it represents just one step in our AI journey. We have structured our partnership with Feedzai for the co-development of even more powerful fraud-fighting, machine learning advances down the road.

Ultimately, our security roadmap will follow a three-pronged strategy that encompasses the following:

  • new innovations, such as AI and machine learning
  • existing fraud-fighting tools, including the CardNav by CO-OP card controls and alerts app
  • fraud consulting, to help credit unions leverage CO-OP technologies to their fullest

“Artificial intelligence has previously been thought of as technology only available to governmental organizations or the largest of corporations,” said Nuno Sebastiao, CEO of Feedzai. “Feedzai is pioneering ‘attainable AI’ – AI that will really work, right now for any sized company. There is perfect synergy between ourselves and CO-OP, and we are very excited to be working with them to bring machine learning to the aid of credit unions.”